This article originally provided by The Charleston Gazette

September 20, 2008

Dominion Resources to pay $50 million in royalty settlement

25,000 oil and gas owners to share money

By Ken Ward Jr.
Staff writer

CHARLESTON, W.Va. -- Dominion Resources will pay up to $50 million to 25,000 oil and gas owners to resolve a lawsuit alleging that the company cheated them out of natural gas royalties.

The settlement, announced this week, resolved a case over gas royalty disputes similar to those that prompted a $400 million jury verdict against Chesapeake Energy Corp. in January 2007.

A much smaller royalty case also has been settled, and negotiations are continuing toward resolving a similar class-action royalty case against Equitable Resources, according to federal court records.

The four cases, all brought by Charleston lawyer Marvin Masters, focused on a dispute over whether gas drillers could deduct production costs before calculating royalty payments to land and mineral owners. The lawsuits alleged that oil and gas companies schemed to intentionally mislead mineral owners into believing that they were being paid all of the royalties due them.

In the Chesapeake case, Roane County jurors awarded a class of more than 10,000 gas well owners $134 million in compensatory damages and $270 million in punitive damages.

That verdict prompted an outcry from the oil and gas industry, and led Gov. Joe Manchin to try unsuccessfully to rewrite state gas royalty laws. The West Virginia Supreme Court declined to hear Chesapeake's appeal.

The lawsuit against Dominion was originally filed in Roane Circuit Court, but moved to U.S. District Court in Charleston in August 2006. U.S. District Judge Joseph R. Goodwin gave preliminary approval to the settlement in mid-July.

On Thursday, lawyers in the case began a program to notify potential class members of the settlement. Generally, the lawsuit includes anyone who had an oil and gas lease with Dominion in West Virginia after June 22, 1996.

Total payments under the settlement could range from $40 million to $50 million, depending on how many class members take part and which of several options for payment they choose, according to court records.

Notices will be mailed to potential class members. A toll-free number, (866) 475-7755 has been set up, as has a Web page, www.dominionclass.com. Goodwin scheduled a hearing Jan. 21 to consider final approval of the settlement.

A much smaller case with similar allegations against North Coast Energy Inc. was settled in federal court for $40,000, records show. The settlement involved several individual plaintiffs, and the lawsuit was never certified as a class action, records show.

Reach Ken Ward Jr. at kw...@wvgazette.com or 348-1702.